In a new report, Deloitte cites no fewer than eight different definitions of a sector that’s anywhere between $10 trillion and $60 trillion in size. Welcome to the amorphous world of “shadow banking.”

The Deloitte Shadow Banking Index attempts to estimate the size of an assortment of financial activities that happen, at least in part, outside the normal world of regulated banking. Shadow banking, as Ben Bernanke put it, is how your car loan – or, before the crisis, your mortgage – gets chopped up, sold to investors and might even end up in your neighbor’s mutual fund. It includes the kind of securities-lending operations which helped to blow up AIG, and it’s vulnerable to a relatively new and dangerous kind of run.

Under Deloitte’s own definition, the US shadow banking system has essentially been cut in half since 2008, to roughly $10 trillion at the end of 2011. This figure is significantly smaller than previous estimates, including one by New York Fed staffers, which put the size of the US shadow banking system at $15 trillion.

So is it good news that the ominous-sounding shadow banking system has shrunk? Mostly, yes. But this is a notoriously hard market to define. Deloitte’s definition of shadow banking excludes some “financial intermediaries” (read: the next AIG), agency mortgage-backed securities (owned by taxpayers through the government’s takeover of Fannie and Freddie) and money market mutual funds. It also, of course, doesn’t account assets at real banks, like the derivatives that recently lost JPMorgan billions.

What’s more, it’s hard to be consoled about the shadow banking system’s $10 trillion size when marquee regulators likeAdair Turner andDaniel Tarullo are still calling for more reforms.

EU Mess
A frightening guide to the increasingly likely end of the euro zone – The Baseline Scenario
Eurobonds would be a “noble expression of European solidarity,” if anyone knew how they’d actually work – NYT
The European repo curve has gone inverted – FT Alphaville

Facebook
We’re “witnessing a significant shift in power from shareholders to entrepreneurs and managers” – New Yorker
“The stock market is no longer the common ownership of the means of production” – Felix

New Normal
US manufacturing is recovering – thanks, in large part, to stagnant wages – WSJ